Number of Schools on Financial Watch List Grows

(Springfield)  The State Board of Education Thursday
approved the 2004 School District Financial Profiles that
include a nearly 79 percent increase in the number of
school districts on the states financial watch list.

When we see more and more schools moving downward
on the list  it is cause for great concern,
State Board Chairman Janet Steiner said. While the
data is just a snapshot  it does give communities
a glimpse of how their districts fare financially statewide.
For some school districts the profile may be used as an
early sign that they need to put some improvements in
place, and for others it affirms appropriate handling
of a their finances.

The Financial Watch List  those school districts
facing the most severe financial problems  includes
156 of the states 893 school districts; another
140 districts are in the next category, the Financial
Early Warning List.

The list is created by using five indicators of financial
performance:

Fund Balance to Revenue Ratio (FBRR)

Expenditures to Revenues Ratio (EXRV)

Days Cash on Hand (DCOH)

Percent of Short-term Borrowing Available (STB)

Percent of Long-term Debt Remaining (LTD).

Each of the five indicators earns a numerical score based
on where the district fits in that category. The first
two indicators are weighted at 35% of the overall score
and the remaining three indicators account for 10% of
the overall score. Added together the five weighted scores
yield a Total Financial Profile Score on a four-point
scale that places districts in one of four categories:
Financial Recognition, Financial Review, Financial Early
Warning and Financial Watch.

The 2003 financial data represents the states decrease
in its portion of education funding from 39-percent in
FY 2002 to just 36-percent. The Financial Profile is based
on the State Boards analysis of school districts
June 30, 2003 Annual Financial Reports.

The list is based on Fiscal Year 2003 financial data,
and also represents a change in the way the designations
are formulated. Without the formula change  the
number of school districts in financial trouble would
actually have been greater.

School districts on the Financial Recognition list will
get a commendatory certificate from the State Board. The
State Board recommends that districts on the Financial
Review list develop a 3-year projection of operating costs,
establish a Finance Committee of the school board, develop
a staffing plan and personnel inventory, and develop a
3-year Equalized Assessed Valuation projection and tax
levy analysis. In addition to those recommendations, districts
on Financial Early Warning will be requested to provide
the State Board with a cash-flow analysis of the current
fiscal year, a balanced budget for the next fiscal year
on an ISBE template, enrollment projections for the next
three years, detailed analysis of short- and long-term
debt, and, if appropriate, a school district reorganization
and incentive study.

The State Board of Education is recommending legislation
to require that school districts on the Financial Watch
List would be required to provide the information itemized
above. The financial records of districts on the Financial
Watch and Financial Early Warning Lists would also be
reviewed by State Board staff to determine if the districts
are eligible for Certification as In Financial Difficulty
or if eligible for Emergency Grant Funds with a Financial
Oversight Panel.

The good news is we saw 544 districts that scored
the same or actually improved  the bad news is that
we 250 districts drop to a lower category, including a
79 percent increase in the number of schools on Financial
Watch, State Superintendent Robert Schiller said.
We also need to remember that this doesnt
represent the Legislature and the Governors significant
increase in General State Aid funding this year.